Accessing Capital and Raising Money for Your Business and Investment Projects

Many of you have raised money to start or expand your business.  Or you’ve raised money to fund an investment project. You’ve tapped family and friends.  You’ve pulled from personal and business lines of credit.  You’ve done “PPM’s” (Private Placements) to raise $1-$6 million or more.

But you’re still wondering how to access the virtually unlimited pool of capital controlled by private equity groups, hedge funds, and capital groups.

This is one of the topics on which I just spent 30 minutes interviewing Matt Jennings, CEO of Westmoore Management Inc., a private equity (aka: hedge fund) group.

It's important to understand that a “private equity” group or hedge fund or capital group are functionally the same thing.  They are a company or “fund” that has a pool of money that they are investing to create a large return for their investors. Some funds specialize in small cap businesses. (Matt’s company focuses on “micro cap” businesses with sales of $5-10 million who need $5-10 million to take their company to the next level to sell or go public.) Other funds specialize in office buildings or various niches of commercial real estate.

The key is to recognize that all these funds are professionally managed by some very busy and skeptical people. But they collectively control hundreds of BILLIONS of dollars that needs to find the right home to generate strong returns.

What does this mean for you? 

First, busy skeptical people tend to do business with people they know.  This means your first action step to access this world of money is to start cultivating these relationships. I can already hear you saying, “But David, I don’t know where to go to start!”

Here are three places that Matt recommended during the interview (again, Maui Mastermind Online members, you’ll be able to download the full audio interview later this month):

1. Do a web search on “private equity groups”, “hedge funds”, “private capital groups”.  Find out who are the key people in the funds that best match up with the type of niche you want the money for.  See if any are in your area (maybe you can arrange a 10 minute “getting to meet you” or a lunch).  Pick up the phone and start calling. 
   
   Better yet, find out what the decision makers are most passionate about (charity-wise) and find a way to join in and help their charity. 
   
2. Attend a conference or gathering that these people will be at.  For example, Matt mentioned “Hedge Funds Care” which has close to a dozen industry conferences around the country over the next year.  (Just google it and you’ll find the site!)  When there, meet people and start building relationships.  It only takes one relationship to lead to what you need (more on this in a moment.)
   
3. Ask your banker, broker, or contacts who they know that they could introduce you too.  My guess is that many of you already know someone who knows the people you want to meet, if only you realize this and ask them to introduce you.

Second, busy skeptical people play it safe.  Now this may sound strange to say of a hedge fund manager or private equity person, but hear me out.  What I mean is that they tend to do business with people they know.  Relationships matter.  Relationships are the game.

Third, busy skeptical people don’t want to wade through a 300 page “pitch book.”  Matt shared with me how he got one pitch book on a deal that was literally SIX INCHES THICK!  (In case you are wondering he just tossed it into the trash – with two hands as it was so heavy.) 

So remember:

1. Keep your “pitch” document to three or four pages MAX.  One page on the deal, one on the team, and one of the numbers.  (I think one or two pages is even better.)  If they are interested they will ASK you for exactly what they need to see to fund the deal.
2. Be relevant.  Matt focuses on microcap businesses and real estate investments; other funds focus on other size companies and industries; and still other funds focus on specific investment niches.  Don’t pitch your deal to the wrong fund.  Be relevant, do your home work.
3. Show them that your team is competent and experienced.  Don’t worry if you have holes, fill those talent holes with OTHER people on your team.  Collectively you need to be credible and experienced.

Many people spend weeks on creating the perfect pitch book for their deal, yet the fund decision makers don’t care about the book. (In fact it may turn them off as too much information.)  Instead, focus on the relationships first. 

David Finkel is the Wall Street Journal and Business Week best-selling author of over 40 books and courses including the wildly successful, The Maui Millionaires for Business.  His is a successful business owner who has bought, built, and sold several multi-million companies over the past 10 years.  To learn more about his tools for business owners visit him on the web at www.MauiMillionaires.com.